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John Moffat.
John Moffat.-
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nmenon3
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a firm maintains a 30% pay out ratio. future projects are expected to generate an annual post tax return on investment of 15% an dpre tax return of 20%. what is the firms expected annual rate of growth?
John Moffat
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There is no point in simply typing out a full question and expecting to be provided with a full answer. You must have an answer in the same book in which you found the questions, so ask about whatever you do not understand in the answer and I will explain.
This is simply asking you to use the Gordons growth approximation formula that is given in the exam, and I explain how to use the formula in my free lectures.
nmenon3
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yes I understand sir, the doubt is whether we have to use pre tax return or post tax return on investment?
sorry for the incomplete questionJohn Moffat
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Post-tax (because it is only the post-tax amount that is available to pay dividends and available for re-investment).
nmenon3
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